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SAP for CIOs - Jon Reed's analysis

This section of JonERP.com contains pieces Jon Reed specifically wrote for CIOs, including for ERPtips. If you're interested in more content Jon publishes for SAP leaders, Jon is now the Editor in Chief for The ERP Executive - Panaya's Magazine for SAP Managers. See Jon's ERP Executive articles here. You can subscribe to ERP Executive content and check out the original content Jon and his team create each month for SAP managers.
Changing the Way Companies Approach ERP Print E-mail
Article Index
Page 2
Page 1 of 2
Turning ERP On its Head:
Can SAP eSOA Change the Way Companies Approach ERP?
Unabridged Edition, Never Before Released
by Jon Reed

Attendees of SAPPHIRE 2007 got one message loud and clear: Enterprise SOA (eSOA) has arrived. Or has it? True, we saw a number of case studies from SAP customers who have taken the Enterprise SOA plunge. But as of today, most companies are either in the “hypothetical” or pilot project phase. This provides us with an ideal opportunity to assess the value of eSOA before more companies dip their toes into that powerful current. In this article, I’ll take a look at the reported benefits from actual SAP eSOA projects that have taken place thus far. We’ll examine the true merits of eSOA, and by the end of this piece, we’ll have a better handle on what eSOA can do and why it may actually be one technical advancement that ends up living up to the hype.

There may not be many eSOA projects in the works yet, but SAP professionals certainly believe that the eSOA era is coming. On a recent survey I did on JonERP.com, SAP professional cited “Enterprise SOA” as the skill area they wanted to learn next, ahead of NetWeaver Portals and NetWeaver BI. There seems to be a growing sense across the SAP market that eSOA is “for real.” In this article, I’ll explain why.

Before we get into the benefits of eSOA, there’s a question we have to tackle first: if eSOA is ready for SAP customers, then why isn’t the usage of eSOA more commonplace yet? It’s no longer a matter of waiting on the technology from SAP, though it’s true that some of the biggest eSOA innovations, such as a fully-loaded Enterprise Services Repository (ESR), are still very recent. The release of NetWeaver 7.1 in September 2007 marks the first edition of NetWeaver with a fully-stocked ESR. But even before the release of 7.1, there was were enough web-enabled SAP services, xApps, and pre-delivered business content to give SAP customers a great start on eSOA. So why aren’t more customers in the middle of eSOA projects?

The answer involves a paradox of sorts: once the structure for utilizing eSOA is in place, it’s not hard to put eSOA into action. But the eSOA structure does have some prerequisites, and it turns out those prerequisites are not simple to put into place. I’m not going to detail all the prerequisites in this article, but preparing for eSOA does require both a technical and business transformation.

The obvious major requirement is an SAP NetWeaver platform, preferably 7.1 or at least 2004s. Most SAP customers are not yet live on ERP 6.0 (the ERP suite that runs on these NetWeaver releases), so we can expect companies to remain focused on the core upgrades before they spend too much time on eSOA.

Other pre-SOA requirements that SAP customers have cited include a coherent strategy for managing master data throughout the enterprise, as well as some type of “governance” program to manage the services that are being created and ensure they are compliant with business regulations. Another aspect of governance is ensuring that services are centrally managed so that they can be accessed across the enterprise. “Governance” is really a fancy way of saying, “Let’s make sure to have a process in place so that you and I aren’t working redundantly on the same project at the exact same time.” 

To add to the ramp-up obstacles, the skills involved in running eSOA projects are not the same as those needed for a classic SAP implementation. Companies have achieved eSOA success by retraining internal employees and mixing in some expert outside consultants, but suffice it to say that anticipating eSOA skills needs is another key consideration before launching.

When we take all these factors together, we can understand why the move to eSOA is more of a creep than an all-out charge. But the move is still happening, and that’s because there are benefits to eSOA that can’t be achieved in traditional ERP environments.

Proven Benefits of eSOA

I. Customization Without the Upgrade Hassles

The biggest benefit of eSOA is the return of customized functionality without the hassles. In my last article for SAPtips, which focused on midsize SAP implementations (August/Sept 2007), I talked about how the best-of-breed era was essentially over for SAP customers who were standardizing on SAP throughout the enterprise. There was a bit of confusion over that statement I hope to clear up this time around.

The proclamation that “best-of-breed is dead” is certainly true in terms of standardizing on the “back office” or core functional areas of SAP. These days, it’s almost unheard of to find a company that is running separate ERP systems for Financials, Human Resources, and Manufacturing and attempting to integrate the three. Those kinds of headaches are the stuff of ERP legend, but they are mostly in the past now. Companies are saving their integration budget for areas beyond the ERP core that pertain to  competitive advantage in their industry.

But integration in the context of eSOA is much more affordable. One of the benefits of eSOA is that it is allows customers to look at a range of customization options without altering the enterprise core. Because eSOA is based on “open standards,” the options for plugging in best-of-breed applications into SAP have never been better. So in that sense, perhaps the true era of hassle-free best-of-breed is just beginning. Of course, using SAP’s own Enterprise Services or xApps, or even building your own, will probably be easier than a best-of-breed alternative, but the point is that eSOA allows more plug-in flexibility without the heavy price.

That price is something we know well from ERP customers who warned that there are financial consequences for overly-customizing SAP when it comes time to upgrade. These “upgrade horror stories” are not specific to SAP. The difficulty of upgrading any ERP package that has been heavily customized has led to the folk wisdom that if you aren’t willing to use an ERP system “out of the box,” maybe you shouldn’t use an ERP system at all.

eSOA changes these tradeoffs. Properly utilized, eSOA allows companies to stay within the base configurations for the enterprise core, but to build custom eSOA apps on top of that core that are not impacted by the upgrade cycle. And these eSOA apps, or services in some cases, can be re-used throughout the enterprise.

II. The Return of Business Process Re-Engineering – Who Would Have Thought?

“Business process re-engineering” is a catch phrase so crusty we can barely remember uttering it. In fact, most of us deny ever using the phrase. But look out - process re-engineering may be making a back-from-the-dead comeback. The ability to re-use and customize Enterprise Services has led some ERP visionaries, such as Mitch Morris, Director of Business Intelligence at Deloitte Consulting, to argue that we can now return to the business process re-engineering (BPR) approach of the mid-90s.

This approach to ERP had to be largely abandoned because we learned that you have to accept the bulk of the ERP vendors’ built-in business processes for your industry in order to be successful.  But with the power of eSOA, the business process re-engineering mindset is suddenly relevant again.

Essentially, with eSOA, you can sit down and chart out your optimal business processes. You can then figure out which of those options are configurable within SAP. Every business process you can fit into the SAP enterprise core goes there.  Any business process that does not fit into standard SAP can then be a candidate for an Enterprise Service.

During the Home Depot eSOA presentation at SAPPHIRE ’07, Kent Sanders, a Manager with SAP’s Customer Advisory Office, described a similar approach that
SAP is recommending for early stage eSOA customers. Sanders explained that as companies look at options for composite applications and Enterprise Services, they should also re-evaluate existing business process to make sure that they aren’t using “outdated business rules” that might be based on yesterday’s ERP limitations. eSOA will allow companies to take a business process driven approach to ERP once again.

Now we know why SAP is calling its new NetWeaver release a “Business Process Platform.” The name may sound a bit generic, but the implications are anything but ordinary. The ability to take advantage of SAP’s best practices, but without sacrificing the specific business processes that make your company special, has never been easily doable. eSOA has the potential to change all that.

Cardinal Health, a flagship SAP customer, detailed this new approach at SAPPHIRE ’07. Brent Stutz, Director of Enterprise Architecture at Cardinal, explained that they set a goal of incorporating 80 percent of their business processes into the SAP enterprise core. The remaining 20 percent of their functionality that could not be fit into SAP then became candidates for “composite applications,” which is a common term for building applications made up of Enterprise Services and re-usable components.

Historically, companies in Cardinal’s situation would have had a very tough choice with that remaining 20 percent of functionality: live without it, change what they do to fit into SAP’s structure, or invest in costly SAP customizations that would put them at risk for future upgrades and pose problems for application support. But using the eSOA framework, Cardinal had a range of options for what to do with that remaining 20 percent.

Wait a minute…does this mark the end of the tried-and-true “80/20 rule?” Well, we probably shouldn’t go that far into eSOA evangelism, but so far, this looks like a major change in how companies go about implementing ERP. The fact that companies like Cardinal are already doing it really gives teeth to Mitch Morris’ “BPR is back” viewpoint.
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